Published on Friday, August 15, 2003 by Greg Palast
Power Outage Traced To Dim Bulb In White
The Tale of The Brits Who Swiped 800 Jobs From New York, Carted
Off $90 Million, Then Tonight, Turned Off Our Lights
by Greg Palast
I can tell you all about the ne'er-do-wells that put out our lights tonight. I came up against
these characters -- the Niagara Mohawk Power Company -- some years back. You see,
before I was a journalist, I worked for a living, as an investigator of corporate racketeers. In
the 1980s, "NiMo" built a nuclear plant, Nine Mile Point, a brutally costly piece of hot junk for
which NiMo and its partner companies charged billions to New York State's electricity
To pull off this grand theft by kilowatt, the NiMo-led consortium fabricated cost and schedule
reports, then performed a Harry Potter job on the account books. In 1988, I showed a jury a
memo from an executive from one partner, Long Island Lighting, giving a lesson to a NiMo
honcho on how to lie to government regulators. The jury ordered LILCO to pay $4.3 billion
and, ultimately, put them out of business.
And that's why, if you're in the Northeast, you're reading this by candlelight tonight. Here's
what happened. After LILCO was hammered by the law, after government regulators
slammed Niagara Mohawk and dozens of other book-cooking, document-doctoring utility
companies all over America with fines and penalties totaling in the tens of billions of dollars,
the industry leaders got together to swear never to break the regulations again. Their plan
was not to follow the rules, but to ELIMINATE the rules. They called it "deregulation."
It was like a committee of bank robbers figuring out how to make safecracking legal.
But they dare not launch the scheme in the USA. Rather, in 1990, one devious little bunch of
operators out of Texas, Houston Natural Gas, operating under the alias "Enron," talked an
over-the-edge free-market fanatic, Britain's Prime Minister Margaret Thatcher, into licensing
the first completely deregulated power plant in the hemisphere.
And so began an economic disease called "regulatory reform" that spread faster than SARS.
Notably, Enron rewarded Thatcher's Energy Minister, one Lord Wakeham, with a bushel of
dollar bills for 'consulting' services and a seat on Enron's board of directors. The English
experiment proved the viability of Enron's new industrial formula: that the enthusiasm of
politicians for deregulation was in direct proportion to the payola provided by power
The power elite first moved on England because they knew Americans wouldn't swallow the
deregulation snake oil easily. The USA had gotten used to cheap power available at the flick
of switch. This was the legacy of Franklin Roosevelt who, in 1933, caged the man he thought
to be the last of the power pirates, Samuel Insull. Wall Street wheeler-dealer Insull creator of
the Power Trust, and six decades before Ken Lay, faked account books and ripped off
consumers. To frustrate Insull and his ilk, FDR gave us the Federal Power Commission and
the Public Utilities Holding Company Act which told electricity companies where to stand
and salute. Detailed regulations limited charges to real expenditures plus a government-set
profit. The laws banned "power markets" and required companies to keep the lights on under
threat of arrest -- no blackout blackmail to hike rates.
Of particular significance as I write here in the dark, regulators told utilities exactly how
much they had to spend to insure the system stayed in repair and the lights stayed on.
Bureaucrats crawled along the wire and, like me, crawled through the account books, to
make sure the power execs spent customers' money on parts and labor. If they didn't, we'd
whack'm over the head with our thick rule books. Did we get in the way of these
businessmen's entrepreneurial spirit? Damn right we did.
Most important, FDR banned political contributions from utility companies -- no 'soft' money,
no 'hard' money, no money PERIOD.
But then came George the First. In 1992, just prior to his departure from the White House,
President Bush Senior gave the power industry one long deep-through-the-teeth kiss
good-bye: federal deregulation of electricity. It was a legacy he wanted to leave for his son,
the gratitude of power companies which ponied up $16 million for the Republican campaign
of 2000, seven times the sum they gave Democrats.
But Poppy Bush's gift of deregulating of wholesale prices set by the feds only got the power
pirates halfway to the plunder of Joe Ratepayer. For the big payday they needed
deregulation at the state level. There were only two states, California and Texas, big enough
and Republican enough to put the electricity market con into operation.
California fell first. The power companies spent $39 million to defeat a 1998 referendum
pushed by Ralph Nader which would have blocked the de-reg scam. Another $37 million
was spent on lobbying and lubricating the campaign coffers of legislators to write a lie into
law: in the deregulation act's preamble, the Legislature promised that deregulation would
reduce electricity bills by 20%. In fact, when San Diegans in the first California city to go
"lawless" looked at their bills, the 20% savings became a 300% jump in surcharges.
Enron circled California and licked its lips. As the number one life-time contributor to the
George W. Bush campaign, it was confident about the future. With just a half dozen other
companies it controlled at times 100% of the available power capacity needed to keep the
Golden State lit. Their motto, "your money or your lights." Enron and its comrades played the
system like a broken ATM machine, yanking out the bills. For example, in the shamelessly
fixed "auctions" for electricity held by the state, Enron bid, in one instance, to supply 500
megawatts of electricity over a 15 megawatt line. That's like pouring a gallon of gasoline into
a thimble -- the lines would burn up if they attempted it. Faced with blackout because of
Enron's destructive bid, the state was willing to pay anything to keep the lights on.
And the state did. According to Dr. Anjali Sheffrin, economist with the California state
Independent System Operator which directed power movements, between May and
November 2000, three power giants physically or "economically" withheld power from the
state and concocted enough false bids to cost the California customers over $6.2 billion in
It took until December 20, 2000, with the lights going out on the Golden Gate, for President
Bill Clinton, once a deregulation booster, to find his lost Democratic soul and impose price
caps in California and ban Enron from the market.
But the light-bulb buccaneers didn't have to wait long to put their hooks back into the
treasure chest. Within seventy-two hours of moving into the White House, while he was still
sweeping out the inaugural champagne bottles, George Bush the Second reversed Clinton's
executive order and put the power pirates back in business in California. Enron, Reliant (aka
Houston Industries), TXU (aka Texas Utilities) and the others who had economically snipped
California's wires knew they could count on Dubya, who as governor of the Lone Star state
cut them the richest deregulation deal in America.
Meanwhile, the deregulation bug made it to New York where Republican Governor George
Pataki and his industry-picked utility commissioners ripped the lid off electric bills and
relieved my old friends at Niagara Mohawk of the expensive obligation to properly fund the
maintenance of the grid system.
And the Pataki-Bush Axis of Weasels permitted something that must have former New
York governor Roosevelt spinning in his wheelchair in Heaven: They allowed a foreign
company, the notoriously incompetent National Grid of England, to buy up NiMo, get rid of
800 workers and pocket most of their wages - producing a bonus for NiMo stockholders
approaching $90 million.
Is tonight's black-out a surprise? Heck, no, not to us in the field who've watched Bush's
buddies flick the switches across the globe. In Brazil, Houston Industries seized ownership of
Rio de Janeiro's electric company. The Texans (aided by their French partners) fired
workers, raised prices, cut maintenance expenditures and, CLICK! the juice went out so
often the locals now call it, "Rio Dark."
So too the free-market cowboys of Niagara Mohawk raised prices, slashed staff, cut
maintenance and CLICK! -- New York joins Brazil in the Dark Ages.
Californians have found the solution to the deregulation disaster: re-call the only governor in
the nation with the cojones to stand up to the electricity price fixers. And unlike Arnold
Schwarzenegger, Gov. Gray Davis stood alone against the bad guys without using a body
double. Davis called Reliant Corp of Houston a pack of "pirates" --and now he'll walk the
plank for daring to stand up to the Texas marauders.
So where's the President? Just before he landed on the deck of the Abe Lincoln, the White
House was so concerned about our brave troops facing the foe that they used the cover of
war for a new push in Congress for yet more electricity deregulation. This has a certain
logic: there's no sense defeating Iraq if a hostile regime remains in California.
Sitting in the dark, as my laptop battery runs low, I don't know if the truth about deregulation
will ever see the light --until we change the dim bulb in the White House